Why homebuyers need to be on alert when it comes to property disclosure statements
Purchaser did not prove seller knew about extent of basement leak
The purchaser needs to be on alert when it comes to buying a house in Nova Scotia.
An adjudicator in the provincial small claims court warns that even though a buyer might have a property condition disclosure statement from the seller, the buyer still needs to do their homework.
Many homebuyers rely on the document to tell them what may be wrong with a property, but it is not a definitive statement of problems that may exist.
In a decision released earlier this month, adjudicator Eric Slone ruled against a homebuyer who claimed the seller knew about a basement water problem and didn't disclose it fully.
"I find that there was no basis for a finding that the Defendant misrepresented the state of his knowledge," Slone wrote.
A property condition disclosure statement is intended to provide information about the condition of a property and hidden defects that might never be picked up on a routine property inspection.
"The PCDS is not a warranty that the property is free from defects," Slone wrote, noting when the seller is held responsible for something that happens after the fact there is a "requirement" to prove the seller intentionally withheld information.
"There must be evidence that convinces the court to draw the inference that they were lying (or being grossly negligent in their statement) when they made it," Slone stated, adding these are not easy cases to prove, although some succeed.
David Surette and his wife owned a house in Halifax's west end. They put it on the market in 2017 and sold it on May 30, 2018 to Alexander Zafiris.
Homeowner disclosed leak
Surette, a real estate agent, filled out a property disclosure statement acknowledging "dampness and potential minor water penetration in basement."
He testified he never saw water coming into the basement, although he said there were some water stains. That suggested there had been a leak.
The home was two units. The lower unit and basement were rented for part of the time Surette owned it.
He said his family only went to the basement to do laundry and to retrieve stored items. He said the tenants never complained about water problems.
Prior to listing the property, Surette removed some built-in units that had obscured the basement walls to ensure they would be visible to potential purchasers.
Home inspector flagged problem
After the agreement of sale was signed, Zafiris hired a home inspector who flagged the basement dampness.
The home inspector noted in his report: "This basement does experience seepage/dampness" and offered suggestions on ways to reduce it.
The adjudicator noted there was no evidence that Zafiris acted on any of the recommendations.
Almost five months after moving in, the new owner discovered "water coming in at an alarming rate in several places" in the basement.
When Zafiris hired a company to give him an estimate for stopping it, he was told it would cost $12,132.50. He was also told this was not the first time they had been to the house, that Surette asked for a similar quote in December 2017.
That led Zafiris to think Surette knew more than he had disclosed.
Homeowner said he was being proactive
Surette told the court he asked for the estimate because a potential buyer might raise the issue of basement dampness and he could show them the estimate and negotiate a price that took the repairs into account.
He added that he was surprised the buyer did not try to negotiate a lower price.
The adjudicator said the disclosure agreement is "at most a modest exception" to the principle of buyer beware.
Generally, he said, sellers make no guarantee as to a property's condition and it's up to the buyer to perform their own inspections, adding he believes most buyers appreciate they may inherit flaws.
He cited a previous decision which said while the seller must be honest when filling out the disclosure statement, it does not guarantee the condition of the property.
The disclosure agreement notes the information contained in it "is believed to be accurate. However, it may be incorrect. It is the responsibility of the buyer to verify the accuracy of this information."
Calling this "a classic buyer beware case," Slone said there were a number of possible reasons for the water entering the basement.
He said it was possible water did flow into the basement when Surette owned the house but he was unaware of it because he seldom went there and it may have dissipated or quickly drained. He dismissed the claim for the cost of remediation. Zafiris has until later this week to appeal the decision.